By Gina Lee
Investing.com – Asia Pacific stocks were mostly down on Monday morning, with crude oil extending gains, as geopolitical tensions over Ukraine continue to impact global markets.
Japan’s Nikkei 225 slid 2.28% by 10:19 PM ET (3:19 AM GMT), re-opening after a holiday.
South Korea’s KOSPI fell 1.40% while in Australia, the ASX 200 was up 0.36%.
Hong Kong’s Hang Seng Index fell 1.06%.
China’s Shanghai Composite was down 0.54% and the Shenzhen Component was down 0.40%.
Concerns are mounting that Russia’s military buildup near its border with Ukraine enters a potentially decisive phase. The U.S. warned that a Russian invasion could be imminent, while Russian President Vladimir Putin asserted that the U.S. has failed to meet his demands.
Russia continues to deny any plans of invasion, and countries are continuing a diplomatic push to resolve the situation. German Chancellor Olaf Scholz will travel to Ukraine later in the day and to Russia on Tuesday for diplomatic talks.
These tensions are adding volatility to a market already rocked by high inflation and the prospect of U.S. Federal Reserve interest rate hikes. A deterioration in Eastern Europe could heighten price pressure concerns if Russian energy supplies are disrupted.
This is likely “to result in a far more volatile ride than 2021, and we are already seeing this,” AMP (OTC:AMLTF) Investments senior economist Diana Mousina said in a note.
While the current standoff in Europe has fanned temporary demand for Treasuries, inflation risks could weigh more broadly, according to abrdn plc multi-asset solutions investment director Ray Sharma-Ong.
U.S. inflation will likely peak in the April release and “as a result of that, markets will get jittery and price in a few more hikes,” he told Bloomberg.
Ahead of the minutes from the Fed’s last meeting, to be released on Wednesday, the central bank should be measured and data-dependent as it starts hiking U.S. interest rates to ensure stability, according to San Francisco Fed President Mary Daly.
Some of Daly’s colleagues, including Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard, will also speak on Thursday. The U.S. Monetary Policy Forum, with speakers including Fed officials Charles Evans, Christopher Waller, and Lael Brainard, will take place a day later.
European Central Bank (ECB) President Christine Lagarde will participate in a parliament debate on the central bank’s annual report later in the day. G-20 finance ministers and central bank governors will also meet from Feb. 17 to 18.
On the data front, the U.S. will release its producer price index (PPI) on Tuesday, with China releasing its own PPI and consumer price index a day later.